Pottery Barn 2004 Annual Report Download - page 20

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To increase our pre-tax operating margin, we expect to implement operational disciplines throughout the supply
chain to reduce returns, replacements and damages, particularly in furniture; improve our furniture sourcing and
inventory management disciplines by implementing a long-term capacity and production planning process with
key strategic vendors; and in-source the management of a primary furniture hub to develop a new “gold
standard” for customer service and to improve the overall operational efficiency of the furniture supply chain
process. Additionally, we plan to test on a national basis a new store replenishment program. During 2005, we
will begin replenishing our retail store inventories on a daily basis with UPS providing the transportation
services. The long-term benefits of this new replenishment program are to improve customer service by reducing
out of stocks in the stores, to reduce inventories in the back rooms of our stores and in local off-site storage
locations, and to reduce inventory damages and shrinkage due to less handling of the merchandise. In the short-
term, however, we expect to incur additional costs to implement this test, which we estimate at approximately
$0.01 per share in 2005.
To enhance shareholder value, we remain committed to delivering against all three of our key strategies
including reaching three new financial milestones: surpassing $3.5 billion in revenues, achieving a 10.0% pre-tax
operating margin, and delivering the highest diluted earnings per share in the history of the Company.
13
Form 10-K